Founded in 1991 by George Hall, New York-based activist hedge fund Clinton Group has been in the asset management business for 25 years now, but its reputation today is nowhere close to what it was a decade earlier. Back in 2003, Clinton Group was among the fastest-growing hedge funds in the world, with assets under management totaling over $5 billion. However, the fund found itself mired in controversies for a considerable period of time over the last decade and its assets plunged dramatically during that time.
According to the fund’s website, it managed assets worth over $2.5 billion at the end of the second quarter and its latest 13F filing reveals that almost 90% of that, or $2.28 billion, was invested in the U.S. public equities market. The filing also shows that at the end of June, Clinton’s equity portfolio was well diversified, with 859 long positions, while its top-ten equity holdings accounted for only 10.16% of the value of its equity portfolio. As per the filing, the fund had considerable exposure to the consumer discretionary and finance sectors at the end of June, stocks from which amassed 21% and 14%, of the value of its equity portfolio, respectively. In this article, we’ll shed light on the five major bullish moves made by the fund in those two sectors during the second quarter.
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– Shares Owned by Clinton Group (as of June 30): 1.97 Million
– Value of Holding (as of June 30): $21.83 Million
Let’s begin with KeyCorp (NYSE:KEY), in which Clinton Group increased its stake by 332% during the second quarter. The bank holding company has lost 8% of its market capitalization this year, however, the decline has at least helped increase its annual dividend yield to 2.8%. Earlier this year, the company received regulatory approval for its $4.1 billion acquisition of Buffalo-based First Niagara. Though by assuming no revenue synergies, the deal is expected to be only 5% accretive to the company’s earnings by its fiscal year 2018, investors expect it to provide many long-term benefits to KeyCorp going forward. Several analysts who track the stock are currently bullish on it, citing the company’s well-diversified, fast-growing lending portfolio and the expected growth from its investment banking operations. However, analysts at Piper Jaffray don’t share that same view on it. At the end of last month, they downgraded the stock to ‘Neutral’ from ‘Overweight’ and also lowered their price target on it to $13 from $14.50. During the second quarter, ownership of KeyCorp (NYSE:KEY) among the funds covered by us rose by six to 46, but the aggregate value of their holdings in it fell by $133 million to $934.46 million.
McDonald’s Corporation (NYSE:MCD)
– Shares Owned by Clinton Group (as of June 30): 192,922
– Value of Holding (as of June 30): $23.22 Million
Clinton Group boosted its stake in McDonald’s Corporation (NYSE:MCD) by almost ten-fold during the June quarter. Shares of the fast food giant have been on a downward journey ever since the company reported its second quarter earnings on July 26 and are currently trading down by 2.5% in 2016. While analysts had expected McDonald’s to report EPS of $1.39 on revenue of $6.28 billion for the quarter, the company delivered EPS of $1.45 on revenue of $6.27 billion. Beset by a stagnating market and challenging operating environment in China, the company is currently engaged in finalizing the sale of the right to operate its restaurants in that country, which is estimated to be worth almost $3 billion. On September 15, Reuters reported that McDonald’s Corporation (NYSE:MCD) has received final offers from at least three entities for its China and Hong Kong outlets. The company’s popularity among the hedge funds in our system saw a notable drop during the second quarter, as its ownership among them declined by 20 to 63 and the aggregate value of their holdings in it dropped by almost $1 billion to $3.03 billion.
We’ll check out three other major moves made by Clinton Group during the second quarter on the next page.